The Nation Newspaper

Tag: debts

  • Anxiety over Nigeria’s $73bn debts 

    Experts have called on government at all levels to put paid to its borrowing  in order to safe the incoming generations from falling into unmitigated debts.

    Speaking at a two-day workshop of The MaroonSquare Discourse on National Development in Lagos, at the weekend, a lecturer at department of Political Science, Lagos State University, Prof. Sylvester Odion-Akhaine, charged Nigerians to learn from the past by showing collective responsibility to prevent a return to the past.

    The academic who was represented by Uzodinma Nwaogbe, a lecturer at Federal College of Education (Technical) Yaba, expressed worried over the blossomed to frightening levels of external debt profile which amount to $22.08 billion in June 30, 2018 from $9.4 billion in March 2015.

    Citing excerpts from the website of Debt Management Office, Nigeria debt profile hit a whooping total of N20 trillion as of September 30, 2017 with an aggregate public debt of about $63.5 billion and is currently in the threshold of $73.2 billion, adding that about two-thirds of government’s revenues would go into debt servicing.

    Speaking on a theme, ‘Nigeria’s Debt Crisis: Journey to where?’, the don explained that the government would require about $2.8 billion external loan to bridge the apparent fiscal deficit in the 2018 budget over which it has issued Euro bond.

    He noted that in the 2019 budget, unbalanced about N2, 264,014,113,092 only is for debt service which put Nigerian government within the safe belt of borrowing.

    Akhaine reminded Nigerian government of the 2016 alarm bell of International Financial Institutions (IFIs) with regards to borrowing by the Nigeria government and other African countries.

    While reiterating that African Development Bank (AfDB) also warned African governments, including Nigeria to be cautious about international borrowing given the consequences of reckless external borrowing such as decline in revenues.

    He explained that exacerbating poverty, eroding national self-worth, and promoting behaviour on the part of states that is often to the detriment of society at large, debt has so has far reaching consequences on relatively all areas of Nigerians’ living.

    Akhaine stated that the previous cycles of crises, the enclave economy continues to feed the venality of public officials and the bleeding of national resources will be on increase if government continue in his usual path of short-term borrowing.

    The don warned that infrastructure-based loans from the Chinese could be deadly and could lead the continent including Nigeria into a recolonisation unless the black nations take circumspection.

    He observed that nations that have walked into the debt loop have historically suffered loss of sovereignty and national pride, state capacity and the related scourge of dependency among comity of nations.

    Stressing further, the don said Nigeria’s external debt crisis is caused by ideology, structural factor and collaborating bourgeois elite which are taking on definitiveness due to the neoclassical emphasis on the importance of capital in the development process.

    The don said diversification of the national economy should go beyond rhetoric to praxis, saying it’s equally important to emphasise and devote energy to human capacity development through vocational training, which guarantees the nation to recover its capacity and express some measure of autonomy in the global jungle.

    He took a swipe on government officials for lacking integrity to manage any form of foreign loans.

    He said the memory of forgetful officials on their very nature and wrote off such excitement as tantamount to walking on the path of illusion given the character of the Nigerian state elites who are not only disoriented but wasteful and unpatriotic.

    “The point must be made that not all countries are equally endowed in terms of human and natural resources making inevitable interdependence. The story of the capitalist global economy goes beyond this. It is underpinned by primary uneven development occasioned first by mercantilism and subsequently slave trade and colonial plunder.

    “International community must guard against regional arrangements, such as China’s Belt and Road Initiative, which are intended to promote development but can end up undermining partner countries. This requires steps to enhance transparency on the terms and conditions of projects and debt undertaken through such initiatives, encourage greater reliance on local labour, and ensure that recipient countries are not encumbered with excessive liabilities,” he warned.

    In a related development, another keynote speaker, Barr. Onyeisi Chiemeke, opined that debt is neither good nor bad, depends on utilisation.

    He explained that it is a fundamental fact the history of modern economies that certain stimuli are requisite to incentivise the economy of any nation.

    Chiemeke noted that despite the rosiness of a steady foreign reserve growth, Nigerians are looking at the macro and micro economics dynamics of Nigeria’s increasing debt situation, particularly from the history of the fact that between 2003 and 2007, there was a high sense of ululation that with the resolution of her debt situation with multi-lateral agencies like the Paris Club.

    Quoting a biblical phrase of the borrower being slave to the lender, the legal luminary said Nigeria’s debt has been on a steep rise, leading to the fear that the future of unborn generations of Nigerians are being mortgaged.

     

  • Anxiety over Nigeria’s N22tn public debt

    In the view of economic and financial analysts, the nation’s rising debts portfolio does not bode well for an economy in dire financial straits fueled in part by depleting oil revenues and other sources, reports Ibrahim Apekhade Yusuf

    To say the alarming rate at which the nation’s public debt is growing has become a source of worry to many is certainly stating the obvious. Truth is, the public debt has literally gone south again, barely few years after the country exited the much contentious debts bobby trap.

    Domestic debt is defined as debt denominated in local currency. The management of domestic debt in Nigeria has hitherto been conducted by the Central Bank of Nigeria (CBN) through the issuance of government debt instruments

    According to analysts, Nigeria has relied much on public debt to finance its development projects in the past two decades ago with public debts which put its debt profile so high. Thus, before the debt write-off by the Paris-club and London club the result shows that the impact on Nigeria economy was much compared to present time. Though, the exit from the Paris club and London club actually reduced Nigeria’s external debt, whereas the domestic debt and the effect created by the huge debt before the debt write-off still have lag effect on the economy. Therefore, based on the above findings we recommended that Nigeria should not borrow now either internally or externally.

    DMO’s alarm

    According to the Debt Management Office, Nigeria’s total public debt rose marginally by 4.52% to $74.28 billion (N22.71 trillion) as at March 31, 2018.

    The DMO said the Q1 2018 increase was accounted for largely by the increase in the domestic debts of the 36 states of the federation and the Federal Capital Territory (FCT), as well as the $2.5 billion Eurobond issued in February 2018 by the federal government whose proceeds were still being deployed to redeem maturing domestic debt.

    The DMO made this known in its first quarter 2018 public debt data released penultimate Wednesday, in Abuja, the nation’s capital.

    Further analysis by DMO

    The DMO said a total of N643.6 billion was spent on servicing the nation’s domestic debt within the period.

    It said N239.8 billion was spent on domestic debt servicing in January, N144 billion in February and N259.7 billion in March 2018.

    N223.4 billion was an interest accruing on Nigeria Treasury Bills/Bonds (NTBs), while N411.7 billion was interest on federal government bonds.

    Interest on the federal government of Nigeria savings bond was N241.8 million while Sukuk bonds stood at N8.167 billion.

    A sum of N279.6 billion of NTBs was redeemed in Q1 2018.

    The Debt Management Office said the debt figures showed that the implementation of the debt management strategy, which entails an increase in the external debt stock through new external borrowing and the substitution of high cost domestic debt with low cost external debt, is achieving the desired results in several areas.

    As at December 2017, the country’s debt stood at $70.92 billion, several months after the largest economy in Africa emerged from its worst recession in over 20 years.

    Also in April 2018, Christine Lagarde, the IMF Managing Director, opined that Global debt stood at $164 trillion which were 25% of global GDP. She lamented that the rising debt levels presented a risk to low-income countries.

    Lagarde said such countries may face hardship and be unable to repay these debts if they do not look for alternative measures to borrowing but Nigeria’s finance minister, Kemi Adeosun dismissed the insinuation, saying Nigeria is not among low-income countries.

    While commenting on the country’s Debt Management Strategy (DMS), Oniha said the Federal Government’s domestic debt at the end of 2017 was N12.589 trillion. The 36 states and the Federal Capital Territory (FCT) have a domestic debt overhang of N3.348 trillion.

    The combined external debt of the Federal Government and the states is N5.787 trillion.

    The new DMS, Oniha said, has brought about the restructuring of the debt portfolio, which “has resulted in reduction of debt servicing costs, lowering interest rates in the domestic market and an improved availability of credit facilities to the private sector.”

    The recent spate of borrowings the DMO boss said, is essentially “for financing capital expenditure and stimulating the economy. The funds injected through the borrowings strongly supported the implementation of the Federal Government’s budget, which helped the country to exit recession in 2017.”

    The figures showed that Nigeria’s Debt Management Strategy is achieving its objective of reducing the ratio of Domestic Debt in the portfolio, with a target of 60% Domestic and 40% External.

    The composition of the Debt Stock as at the end of 2017 showed that External Debt was 26.64% of the portfolio, up from 20.04% in 2016. Domestic Debt was 73.36%, down from 79.96% in 2016.

    The key benefits of the restructuring of the portfolio, Oniha explained “are the reduction of the Government’s Debt Service Costs, lowering of interest rates in the domestic market and improved availability of credit facilities to the private sector.”

    The DMO repaid N198 billion Nigerian Treasury Bills in December 2017 with the proceeds of Eurobond issuances and the DMO has continued further implementation of the strategy in 2018, with the issuance of the USD2.5 billion Eurobonds in February 2018, the proceeds of which is being used to repay maturing domestic debt, starting with N130 billion NTBs repaid on March 1, 2018.”

    “The Total Public Debt as at December 31, 2017 represents 18.20% of Nigeria’s GDP for 2017. This shows that Nigeria’s debt continues to be sustainable and is well within the threshold of 56% for countries in Nigeria’s peer group,” Oniha stated.

    Ms. Oniha assured Nigerians that the most important consideration for these borrowings was that the proceeds were being prudently applied to bridge infrastructure gaps occasioned by the decline in revenues.

    She also promised that “the rate of increase of debt servicing would reduce, going forward, given the Federal Government’s attention to raise revenue through the Voluntary Assets and Income Declaration Scheme (VAIDS), as well as targeted efforts to increase local production of some of the goods responsible for high foreign exchange demand.”

    She also noted that Nigeria borrows from other countries, such as Japan, France, India and Germany, “based on Nigeria’s needs, interests and conditions considered favourable to the nation.”

    Meanwhile the research team at Proshare noted that the public debt (total of both external and domestic debt) in Nigeria has been increasing over the last five years and the issue of the sustainability of the debt level has generated a lot of debate.

    The increase in external borrowing and the impact of exchange rate depreciation were the main reasons for the reduction in the proportion of the domestic debt stock. The FGN has set what it believes to be an optimal domestic debt to external debt ratio at 60:40. At the current (external to domestic debt) level of 78:22, it appears that there is still room to increase the external debt component of the total debt stock.

    The major stress point is the rising level of interest payment relative to government revenue. The ratio of interest payment-to-government revenue increased from 24.48% in 2012 to an estimated 35.32% in 2016.

    “In the short-to-medium-term, government will need to borrow both from external and domestic sources in order to augment the low revenue facing the country as a result of the current economic challenges. The FGN needs to improve critical infrastructure in the country to increase the competitiveness of the economy to attract investments. This requires more money than current government revenue.”

    The FBNCapital Research team is also on the same page with Proshare. “In our second commentary on the DMO’s data release for end-2016, we highlight the alarming increase in FGN domestic debt service (see chart). Payments have soared from N354bn in 2010 to N1.23trn last year.”

    Besides, the researchers inferred that the focus on the domestic payments because they comprise close to 90% of the total burden, and because the FGN’s external debt obligations are overwhelmingly concessional and far less costly than its naira borrowing.

    “The strength of the message on the successful Eurobond roadshow in February was based on the FGN’s external balance sheet.”

    According to the team, to highlight the strains on the public finances, total debt service in 2016 represented a projected 35.4% of total FGN revenue. The ratio is so dire, of course, because the record of revenue collection has been poor. The Economic Recovery and Growth Plan 2017-20 has the ratio deteriorating to 38.1% in 2018, and improving marginally to 34.5% in 2020.

    “The explanation is twofold. Firstly, the projections assume stronger revenue collection and spending discipline, such that a primary surplus (before the deduction of interest payments) is achieved from 2019.”

    Secondly, they have financing of the deficit predominantly external from next year (66% in 2018, rising to 72% at the end of the plan period in 2020).

    The test of the plan is successful delivery, above all the use of the borrowed funds to create growth, employment and diversification of the economy. This administration has to set far higher standards than its predecessors.

    Whereas the Debt Management Office has assured that the seeming rising public debts is nothing to worry about other experts believe there is serious cause for alarm.

    According to Paul Ndubuisi, a researcher, the act of borrowing creates debt. Debt therefore, refers to the resources of money in use in an organisation which is not contributed by its owners and does not in any other way belong to them, it is a liability represented by a financial instrument of other formal equivalent.

    Echoing similar sentiments, Chris O. Udoka of the Department of Banking & Finance University of Calabar, Calabar, Cross River, and his counterpart, Samson Ogege, at the Department of Finance, Faculty of Business Administration University of Lagos, Lagos, in a joint paper titled, ‘Public Debt and the Crisis of Development in Nigeria Econometric Investigation,’ while noting that national debt consists of all securities issued by the federal government and held by the Central Bank of Nigeria, individual and foreigners, government agencies and trust funds, private sector as well as those held by commercial banks, however said, increase in the debt stock was largely as a result of the interest component of additional payment arrears that accumulated, and continued depreciation of the US dollar against other currencies in which the debts were denominated.

    Domestic Debts

    It also identified external debt relief as a good option for poor unsustainable indebted countries as a way of making resources available for economic growth with the real sector being the focal point where value is created rather than impeding it with mismanagement and servicing debt. Udoka and Ogege examined the extent of external debt crisis and its consequences on, economic development using data on the Nigerian economy for the period 1970 to 2010.

    Rewane’s fears over servicing external debts

    Expectedly, the Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane has expressed concern over the nation’s foreign debts.

    Rewane who spoke during a presentation at a breakfast session sponsored by Rand Merchant Bank in Lagos, said the forecast for the nation’s economy showed a mixed outcome of positivity and negativity.

    “The pressure on the exchange rate will build up due to increased liquidity and demand pressures, and there would be a temptation to appreciate the naira for political expediency. Key policy reforms will take the back burner for politics. Nigeria’s foreign debt service will become a potential problem. Nigeria’s external trade will be more balanced between Asia, the European Union and America.”

    Alarming States ‘debts

    The debt stock data released by the National Bureau of Statistics (NBS) revealed that the smallest state in Nigeria- Lagos, with a landmass of 3,345km, has the largest debt burden among all states. The state’s debt stock is 35.61% of the country’s foreign borrowings. Kaduna (5.79%), Edo (5.64%), Cross River 4.08% and Enugu 3.23%, are all clustered behind Lagos.

  • Debts: Nestoil to offload shares in Neconde’s OML 42 asset

    The management of Nestoil, the oil service arm of the  Obijackson Group, owned by Nigerian business mogul Dr. Ernest Azudialu, is to offload part of its shares in oil mining lease (OML) 42 in the Western Niger Delta, which is operated by Neconde Energy Limited, to pay its debts to banks.

    According to Oil+Gas Report, Nestoil holds 80 per cent of Neconde and is the prime mover of its special purpose vehicle (SPV) creation, which took over Shell/Total/ENI’s 45 per cent stake in the acreage in 2012. The remaining 55 per cent is held by the Nigerian National Petroleum Corporation (NNPC) and managed by its exploration and production arm, Nigerian Petroleum Development Company (NPDC).

    Explaining the reason for the planned sale of equity by Nestoil, the report noted that creating value from the asset has been an epic struggle. While Neconde paid $585 miliion to buy the 45 per cent, it has found it difficult to reach and maintain optimum output and price to pay back the debts and also fund the needed expansion.

    The struggle first started with the NPDC, which was chosen as the operator of the OML 42 field on takeover from Shell and partners. NPDC’s alleged inefficiency and struggle for the operatorship of the asset kept production at a very suboptimal level of less than 20,000 barrel per day (bpd) for over three years.

    Besides, within the same period of struggle for the operatorship of the field, crude oil price crashed and worsened a bad situation and the Niger Delta militants struck and bombed the crude evacuation pipeline of the field, the Forcados pipeline, forcing the terminal to shut down for 16 months between February 2016 and June 2017.

    However, out of the $585 million paid for the asset, the consortium partners (Nestoil, Yinka Folawiyo and KOV) paid $435 million as equity and collectively raised $150 million as debt, but what’s not clear is how much of the $435 million equity was raised as debt by the members of the SPV.

    Efforts made by The Nation for further clarifications from the Managing Director/Chief Executive Officer of Neconde Energy, Mr. Frank Edozie, did not yield any fruit as calls and short messages sent to him were not responded to.

    But last year, Obijackson Group Chairman, Dr. Ernest Azudialu and Mr. Edozie, at a press briefing in Lagos, lamented the huge financial challenges facing Neconde Energy following the hiccups faced by the downturn in the global oil gas industry since 2014. The challenges, especially crash in price coupled with security issues in the Niger Delta and struggle for operatorship, which stalled production increase, made it difficult to operate profitably to pay the banks.

    At a press briefing meant to alert the public of the plans by Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) to picket Neconde Energy, following labour issues within the company, the management decried PENGASSAN’s action, considering the enormous challenges already facing the firm.

    Azudialu said the Neconde employees, including those that had left the company, wanted transfer allowances for being transferred to Delta State where the oil field is located while the $558million borrowed from Nigerian banks and other international finance firms to acquire the asset have not been repaid in its and another loan, which is almost the same amount used to repair the facilities and interests are only being serviced. Therefore, the employees, who want to leave the company should take the company’s existing severance package.

    According to Edozie, the potential production from the asset was 100,000 barrels per day (bpd) at the time of purchase, but on completion of the acquisition, production was about 52,000 bpd. Following the long battle for operatorship of the field, attacks on oil facility, especially the blowing up of the Forcados pipeline on February 13, 2016, which is the only means of transporting oil from the fields to the terminal, production dropped to zero. He added that the firm has started to ramp up production and expects to increase output to 70,000bpd.

  • Debts: Nestoil to sell some shares in Neconde’s OML 42 asset

    The management of Nestoil, the oil service arm of the Obijackson Group, owned by Nigerian business mogul Dr. Ernest Azudialu, is to offload part of its shares in oil mining lease (OML) 42 in the Western Niger Delta, which is operated by Neconde Energy Limited, to pay its debts to banks.

    According to Oil+Gas Report, Nestoil holds 80 per cent of Neconde and is the prime mover of its special purpose vehicle (SPV) creation, which took over Shell/Total/ENI’s 45 per cent stake in the acreage in 2012. The remaining 55 per cent is held by the Nigerian National Petroleum Corporation (NNPC) and managed by its exploration and production arm, Nigerian Petroleum Development Company (NPDC).

    Explaining the reason for the planned sale of equity by Nestoil, the report noted that creating value from the asset has been an epic struggle. While Neconde paid $585 miliion to buy the 45 per cent, it has found it difficult to reach and maintain optimum output and price to pay back the debts and also fund the needed expansion.

    The struggle first started with the NPDC, which was chosen as the operator of the OML 42 field on takeover from Shell and partners. NPDC’s alleged inefficiency and struggle for the operatorship of the asset kept production at a very suboptimal level of less than 20,000 barrel per day (bpd) for over three years.

    Besides, within the same period of struggle for the operatorship of the field, crude oil price crashed and worsened a bad situation and the Niger Delta militants struck and bombed the crude evacuation pipeline of the field, the Forcados pipeline, forcing the terminal to shut down for 16 months between February 2016 and June 2017.

    However, out of the $585 million paid for the asset, the consortium partners (Nestoil, Yinka Folawiyo and KOV) paid $435 million as equity and collectively raised $150 million as debt, but what’s not clear is how much of the $435 million equity was raised as debt by the members of the SPV.

    Efforts made by The Nation for further clarifications from the Managing Director/Chief Executive Officer of Neconde Energy, Mr. Frank Edozie, did not yield any fruit as calls and short messages sent to him were not responded to.

    But last year, Obijackson Group Chairman, Dr. Ernest Azudialu and Mr. Edozie, at a press briefing in Lagos, lamented the huge financial challenges facing Neconde Energy following the hiccups faced by the downturn in the global oil gas industry since 2014. The challenges, especially crash in price coupled with security issues in the Niger Delta and struggle for operatorship, which stalled production increase, made it difficult to operate profitably to pay the banks.

    At a press briefing meant to alert the public of the plans by Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) to picket Neconde Energy, following labour issues within the company, the management decried PENGASSAN’s action, considering the enormous challenges already facing the firm.

    Azudialu said the Neconde employees, including those that had left the company, wanted transfer allowances for being transferred to Delta State where the oil field is located while the $558million borrowed from Nigerian banks and other international finance firms to acquire the asset have not been repaid in its and another loan, which is almost the same amount used to repair the facilities and interests are only being serviced. Therefore, the employees, who want to leave the company should take the company’s existing severance package.

    According to Edozie, the potential production from the asset was 100,000 barrels per day (bpd) at the time of purchase, but on completion of the acquisition, production was about 52,000 bpd. Following the long battle for operatorship of the field, attacks on oil facility, especially the blowing up of the Forcados pipeline on February 13, 2016, which is the only means of transporting oil from the fields to the terminal, production dropped to zero. He added that the firm has started to ramp up production and expects to increase output to 70,000bpd.

  • Can police recover debts?

    If you reside at Ajegunle in Lagos State or any apartment which Nigerians popularly call “face me I face you” or “face me I slap you”, you must have witnessed one or two occasions where men of the Nigerian Police were “employed” to arrest a citizen because he owes some amount of money. This is also the case amongst some wealthy Nigerians.

    Briefly, debt can be defined as a sum of money that is owed or due. In law, debts fall under civil contracts.

    Will I be right to say the Police are not right in any way to arrest or interfere in matters of civil contracts?

    So, what then are the duties of the Nigerian Police force?

    Section 4 of the Police Act, Cap. 19, Laws of the Federation of Nigeria, 2004 clearly states the general duties of the Police. I will reproduce the said section for easy reference and proper understanding.

    “The Police shall be employed for the prevention and detection of crime, the apprehension of offenders, the preservation of the law and order, the protection of life and property and the due enforcement of all laws and regulations with which they are directly charged and shall perform such military duties within or without Nigeria as may be required by them by, or under the authority of, this or any other Act.”

    From the foregoing, it is clear that the duties of the Police is strictly meant for the prevention and detection of crime, to preserve the laws of our land and others stated above.

    What has been the attitude of the court to this issue?

    Ita George Mbaba of the  Court of Appeal, Ilorin division  in the case of Ibiyeye & Anor. V. Gold & Ors, Appeal No: CA/IL/M.95/2010 had cause to say: “I have to add that the resort to the Police by parties for the recovery of debts outstanding under contractual relationship has been repeatedly depreciated by the Court.

    “The Police have also been condemned and rebuked several times for abandoning its primary duties of crime detection, prevention and control to dabbling in enforcement or settlement of debts and contracts between quarrelling parties and for using its coercive powers to breach citizens rights and/or promote illegalities and oppression.

    “Unfortunately, despite all the decided cases on this issue, the problem persists and the unholy alliance between aggrieved contractors/creditors with Police remains at the root of many fundamental rights breaches in our courts”.

    My Lord, Mbaba JCA in OSIL V. Balogun (2012) 38 (P.p 173-174) lines 30-5  W.R.N  said:  “The Police has no business in enforcement of debt settlements or recovering of civil debts for banks or anybody.”

    What can one do when the Police arrest for debts?

    As soon as the Police arrest you, the first step to take is to contact a lawyer. Never be intimidated or coerced to make a statement.

    Secondly, the lawyer will file an application for the enforcement of fundamental rights of the person arrested. (That is a way to make money out of the Police).

    “As the laws of this country stand, the Police have no power to detain a person for breach of contractual obligations. Any such detention is a violation of the persons right to freedom of movement,” according to McLaren V. Jennings (2003) FWLR (Pt. 154) 528

    What happens to the person who employed the Police to interfere in a civil matter?

    My Lord, Ita George Mbaba of the Court of Appeal, Owerri Division in Anogwie & Ors V. Odom & Ors (2016) LPELR-40214 (CA) had the following to say: “The position is and has always been that the private individual who uses the Police to settle a private score, would himself be liable for the wrongful act of the Police.”

    What then is the right thing to do when you are being owed?

    There are basically two legal ways to get your money paid as the creditor.

    First, employ the Alternative Dispute Resolution mechanism (ADR). By this method, both parties will be called to settle and draw out a visible plan on how the debtor will redeem the debt owed.

    Secondly, if ADR doesn’t work out, you should employ the services of a legal practitioner to institute an action in court against the debtor.

    Conclusion

    Don’t be deceived. The Police are fully aware that they don’t have the power or duty to arrest a citizen or even an alien that is indebted to a Nigerian.

    Hence, no Police has no right or duty to arrest you because you are owing some amount of money.

    However, this should not be seen as a shield against creditors.

    • Sanya is an Ibadan lawyer.

  • Obaseki to PDP: I’m paying your debts

    Edo State Governor Godwin Obaseki has said the state’s debts were mainly incurred when the Peoples Democratic Party (PDP) held sway.

    Obaseki said his administration had been prudent with external borrowing and had judiciously utilised all credits to fund projects.

    Speaking through his Special Adviser on Media and Communication Strategy, Mr. Crusoe Osagie, most debts being repaid were incurred by PDP government.

    Obaseki noted that there is the N30 billion debt taken from the African Development Bank (AfDB) for water infrastructure and a Union Bank loan in the balance sheet of Edo Line.

    He said it was disheartening that a party exhibiting the most primitive understanding of public finance would make unfounded claims about the prudent management of state’s finances.

    The governor noted that it is not until the APC came into government and reformed state’s finances that the government could access facilities from multilateral organisations.

    According to him, “these are besides several other such borrowing, which officials of the PDP government took privately and converted to state liability. The state government is still paying these debts.

    “The PDP is still raising evil guts to talk about these debts, when in fact, they are the ones who threw the state into the debts. The PDP was so irresponsible in debts and loans that the World Bank placed a ban on Edo State government. These loans were of single digit interest and the moratorium ran into 10 years.

    “It was during the administration of the PDP that the United Nations Development Programme (UNDP) pulled out of the state because of the irresponsibility of the government at the time. The PDP lacks the credibility and moral standing to make any comment.

    “They are made up of people who lack the capacity to frugally allocate resources for positive outcomes. Debts at low interest rates are actually good for development and show the state as viable. It is even better when the debts are used to fund developmental projects.”

  • Terminal operators get two weeks to clear N40b debts

    Terminal operators get two weeks to clear N40b debts

    Terminal operators indebted to the Nigerian Ports Authority (NPA) have two weeks  to pay up or be sanctioned.

    At a stakeholders’ forum held in Lagos, NPA Managing Director Ms Hadiza Bala Usman threatened to sanction any operator who fails to clear its debt or provide holding bays for empty containers.

    Sources at the Federal Ministry of Finance (FMoF) told The Nation that the operators are owing about N40 billion.

    A source said NPA would double its revenue next year if operators kept their agreement with the authority.

    Usman also warned the operators against violating the terms of the concession under which the terminals were handed over to them.

    She cautioned shipping companies against engaging in shoddy business at the ports.

    “All terminal operators that owe NPA must be ready to pay up their debt. They must pay in the next two weeks or face serious sanctions,” she said.

    Ms Usman was furious when she learnt that an operator and a shipping company were violating the concession agreement.

    The National Public Relations Officer of the Association of Nigerian Licensed Customs Agents (ANLCA,), Dr Kayode Farinto, alleged that the shipping company was charging importers additional N75,000 on each container.

    Farinto said the shipping firms and operators were making billions of naira yearly from some of the unilateral charges.

    Other stakeholders were unhappy that the operators were delaying clearing, resulting in increased port charges.

    Ms. Usman ordered an investiga-tion into the allegations of excessive charges amongst shipping firms and operators.

    NPA’s accounts section, she said, would recover all outstanding debts to boost the nation’s revenue profile.

    The NPA boss assured stakeholders that agreements signed with  operators and others would be reviewed in April, stressing that her administration had plugged loopholes to ensure transparency and accountability.

    She said a competitive tariff and pricing regime had been introduced at the ports, adding that NPA would ensure that operators complied with their agreements with the government.

    Some of the challenges stakeholders said were militating against revenue generation, include: provision of  a modern signal/control tower; an efficient signal station to monitor ship and other activities in the ports; provision of pilotage services by NPA; fostering Information Communication Technology (ICT) to improve service delivery through automation, hardware and speedy network and provision of marine craft and operational vehicles to boost efficiency at the ports.

    The stakeholders urged NPA to resolve the issues surrounding trailer parks and Apapa traffic gridlock.

  • Govt to refinance debts with $3b, says Adeosun

    Govt to refinance debts with $3b, says Adeosun

    The Federal Government is to apply $3 billion in refinancing the legacy debts of the immediate past government, the Minister of Finance, Mrs. Kemi Adeosun, has said.

    She said the outlay is part of the $5.5 billion foreign loan being sourced from the international financial markets.

    Mrs. Adeosun, who spoke on Arise TV’s News Programme, said the proposed $5.5 billion loan is to refinance inherited debts to the tune of $3billion and new borrowing of $2.5 billion for 2017 Budget.

    “Let me explain the $5.5 billion borrowing because there have been some misrepresentations in the media in the last few weeks. The first component of $2.5 billion, represents new external borrowing provided for in the 2017 Appropriation Act to part finance the deficit in that budget,” she said, pointing out that “ the borrowing will enable the country to bridge the gap in the 2017 budget currently facing liquidity problem to finance some capital projects.”

    On the second component, she said: “We are refinancing existing domestic debt with the $3 billion external borrowing. This is purely a portfolio restructuring activity that will not result in any increase in the public debt.”

    Adeosun further noted that the country’s debt rising from N7.9 trillion in June 2013 to N12.1 trillion in June 2015, despite the fact that only 10 per cent of the budget was allocated to capital expenditure when oil price exceeded $120 per barrel.

    She said the President Muhammadu Buhari-led administration was investing in critical infrastructural projects such as roads, rails and power in order to deliver a fundamental structural change to the economy that would reduce the nation’s exposure to crude oil.

    “Under this dispensation, we are not borrowing to pay salaries. If all we do is to pay salaries, we cannot grow the economy. This administration is also assiduously working to return Nigeria to a stable economic footing. In light of this, the government adopted an expansionary fiscal policy with an enlarged budget that will be funded in the short term, by borrowing,” Adeosun said.

  • Senate to probe Etisalat $1.2bn debt crisis

    Senate to probe Etisalat $1.2bn debt crisis

     The Senate Tuesday resolved to investigate the management and utilization of the $1.2 billion loan facility obtained by Etisalat (Nigeria) from 13 Nigerian banks.

    The upper chamber mandated its Committees on Banking, Communications, Capital Market and National Security and Intelligence to probe the deal.

    It also asked the joint Committee to make recommendations on ways the country’s Financial Governance Structure could be strengthened by legislations to prevent any future similar reoccurrence of such crisis.

    The Senate urged relevant financial intelligence agencies of the Federal Government to investigate the management of Etisalat (Nigeria) and hold the defaulting parties accountable for their actions.

    The resolutions followed the adoption a motion on “the need for Senate’s intervention in the recent ETISALAT (Nigeria) $1.2 billion debt crisis” sponsored by Senator Solomon Adeola (Lagos West)

    Adeola in his lead debate noted that Etisalat Nigeria, a Telecommunication Company operating in Nigeria has in recent times been in the public eye over it’s $1.2bn loan crisis.

    The lawmaker said that he is aware that the syndicated loan was acquired in 2013 as a medium-term, seven-year facility to fund expansion of the network from a consortium of 13 Banks in Nigeria.

    He said that Etisalat ownership comprises of three shareholders, the United Arab Emirates Sovereign Wealth Fund through Mubadala Development Comp Abu Dhabi (45 /u), Emirates Telecommunications Group Company (40%) and Myacinth (15%) through Emerging Markets Telecommunications Services.

    Adeola said that as of 2016, the company had started defaulting on its $1.2 billion loan obligations leading to a few bailouts from its Parent Company in Abu Dhabi.

    He noted that only about 42% of the loan has been repaid, remaining an outstanding debt of $696 million representing 58% of its Capital, which Etisalat has failed to service since 2016.

    He said that “since this year, the Banks have been moving to take over the Telecommunications Company in order to recover their funds.”  

    The Lagos West senator said that the Nigerian Communications Commission (NCC) and the Central Bank of Nigeria (CBN) have intervened and raised issues of regulatory compliances in trying to prevent a takeover by the banks, but the intervention has failed to produce an agreement on the debt restructuring.

    He observed that all UAE shareholders of Etisalat Nigeria, including state-owned investment fund Mubadala, had exited the company coupled with the resignation of top key management officers of the Company the Chief Executive Officer Mr. Matthew Willsher, Chief Financial Officer Mr. Wole Obasunloye, Director and the 3rd Shareholder/PartnerMr. Hakeem Belo Osagie;

    Adeola regretted that although it should ordinarily not be the duty of the Senate of the Federal Republic of Nigeria to wade into individual debt crisis of private sector businesses; but the Senate is convinced that if this situation is not pr0perly handled, it will have negative implications for the Nigerian Business Environment and on Foreign Investments in Nigeria in general

    He also regretted that a loan of this magnitude has the capacity of setting off another Banking crisis in Nigeria, with Banks looking for bailout funds once again.

    Believes the Nigerian Business Environment must be protected and insulated from all forms of fraudulent dealings in order to advance the Government’s drive towards promotion of genuine investments in Nigeria;

    Regrets that about 4000 jobs are at stake as a result of these suspicious dealings;

    He noted that the decision of the core investors to pull out of Nigeria raises issues of suspicion, on the intent of a Company in obtaining a loan facility, defaulting and then pulling out of the country, hoping that their shares would be used to write off the debts.

    He said that he is aware of allegations that the loans have been diverted to other uses not related to the business for which the huge loan was obtained, as there was no evidence of what the Company did with the loans,

    Senate President, Abubakar Bukola Saraki, said that the Senate must do what it could to protect jobs in the country and work to ensure that the right thing is always done.

  • Nigeria raises concerns over electricity debts owed by Benin, Togo

    Nigeria raises concerns over electricity debts owed by Benin, Togo

    The Federal Government yesterday raised concerns over continuous electricity supply to Republic of Benin and Togo in spite of non-payment of outstanding bills and when Nigerians need the same power.

    Permanent Secretary, Ministry of Power, Works and Housing (Power) Dr. Louis Edozien made the Federal Government’s position known at the opening of the route and environmental and social impact assessment study on the Nigeria-Benin 330 KV reinforcement project.

    He urged the company in charge of the bilateral power deal,  Communaute Electricique  du Benin (CEB), and Togo to pay up the mounting debts.

    The  said the ministry’s primary responsibility is to satisfy the electricity needs of Nigerians, “although the Federal Government is committed to integrating Economic Community of West African States (ECOWAS)  electricity market”.

    Edozien told the West African Power Pool (WAPP) delegates that  “Nigerians are not satisfied. I will explain why it makes sense to do this even in the context of the current dissatisfaction, but it is very difficult to make that argument very persuasively when the electricity we have already supplied is not paid for”.

    “So, I want to use this platform to emphasis to CEB that the debt that has accumulated for electricity already supplied needs to be settled as quickly as possible. It helps us explain to Nigerians why we should and must sign the supply by doing projects like this one.

    “Now, not only must the debt be paid but a mechanism must also be put in place to make sure the debt doesn’t balloon again and they are paid for as and when due,” he said.

    According to him, the essence of the commitment to supply power to the West Africa CEB and Niger Link arose out of government’s multi-lateral understanding about optimising the use of the River Niger as a resource.

    Edozien, however, told the delegates that the Nigerian electricity industry has moved from a vertically integrated government monopoly to an industry with private investors, hence the need for a power purchase agreement.

    He said it was “necessary to move the arrangement into a proper contract and I believe that that discussion is already on the way to move CEB contract from basically a government to government multi-lateral agreement to a proper purchase agreement with the Nigerian Bulk Electricity Trading Company for the existing supply”.

    He added: “Now as your needs grow and as projects like this one are completed, you sign the amount of energy you are buying from Nigeria. Our expectation is that you will look to individual generation operators – two of whom are here – to contract the supply you need. The regulator is here and he is putting in place regulatory framework so that you can contract directly with the people who want to supply to you and I believe you have one such contracts already.”

    Interim Managing Director and WAPP Chairman Mr. Usman Gur Mohammed explained that the project, which is the second Ikeja West (Nigeria) to Sakete (Benin Republic) transmission line will be due for commissioning in 2021.

    The project, he said, is expected to take 24 months after six months of feasibility studies and the procurement process.

    The TCN boss noted that African Development Bank (ADB) is committed to financing the project, adding that it was the ones that funded the line from Ikeja West to Sakete and would still use the same funding corridor.

    The ECOWAS representative said the 330KV Nigeria/Togo Interconnection Reinforcement Project was aimed at augmenting the power exchange capacity of its predecessor, which was commissioned by WAPP in 2006.

    He added that the project shall stabilise the WAPP coastal transmission backbone spanning from Nigeria, Cote d’ Ivoire through Benin, Togo and Ghana, to increase the power potential of ECOWAS countries like Niger, Burkina Faso and Mali.

    The Nigerian Electricity Regulatory Commission (NERC) Vice Chairman Sanusi Garba noted that government would not under the arrangement compromise power supply to Nigeria.